Ni Putu v GRYK Holdings Pty Ltd; Sathio v GRYK Holdings Pty Ltd Holdings Pty Ltd (No 3)

[2004] NSWSC 509

CITATION:	Ni Putu v GRYK Holdings Pty Ltd; Sathio v GRYK Holdings Pty Ltd Holdings Pty Ltd (No 3) [2004] NSWSC 509
HEARING DATE(S):	27/04/04, 28/04/04, 29/04/04
JUDGMENT DATE:	15 June 2004
JUDGMENT OF:	Gzell J
DECISION:	Originating Process dismissed with costs.
CATCHWORDS:	CORPORATIONS - Registers - Claim for rectification - Whether share transfer forms signed in blank evidenced transfers of shares - Whether such transfers were vitiated by fraud or unconscionability - Whether the misstatement of the consideration and backdating of the transfer forms gave rise to an entitlement to rectification under the Stamp Duties Act 1920, s 97(1) or the Corporations Act 2001 (Cth), s 1091(1)
LEGISLATION CITED:	Stamp Duties Act 1920 Corporations Law (Cth) Corporations Act 2001 (Cth)
CASES CITED:	Grant v John Grant & Sons Pty Ltd (1950) 82 CLR 1
PARTIES :	Tio Saurdana Sathio - Plaintiff Dewi Murni Ni Putu - Plaintiff GRYK Holdings Pty Ltd - First Defendant Paul Wardana Sathio - Second Defendant
FILE NUMBER(S):	SC 5230/03; 5231/03
COUNSEL:	Mr Gregory George - Plaintiffs Mr Howard Insall SC & Ms Philippa Ryan - Defendants
SOLICITORS:	DTA Lawyers Blessington Judd Lawyers

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

GZELL J

TUESDAY 15 JUNE 2004

5230/03 DEWI MURNI NI PUTU v GRYK HOLDINGS PTY LTD & ANOR (NO 3)
5231/03 TIO SUARDANA SATHIO v GRYK HOLDINGS PTY LTD & ANOR (NO 3)

JUDGMENT

1 In proceedings heard together the plaintiffs, a mother and son, sought rectification of the share register of the first defendant, a company controlled by another son, the second defendant and his wife. The mother brought her proceedings as administratrix of her late husband’s estate.

2 The deceased was a successful businessman in Bali. He provided funds when the company was established in 1990 by the second defendant, Paul Sathio, to develop real estate. There was some confusion in the evidence as to how much the deceased provided. Initially, Paul Sathio said it was approximately, but less than, $1 million. In a later affidavit he said it was approximately $600,000.

3 Mrs Ni Putu, the mother, said that she and her husband mortgaged their home at Maroubra for $230,000 to provide portion of the funds for investment in the company.

4 In any event, the deceased and Paul Sathio held 45 shares each and the remaining 10 shares were held by a friend of Paul Sathio’s, Hengkie Subagio. In 1993, five of Mr Hengkie’s shares were transferred to the plaintiff son, Tio Sathio.

5 There was in evidence a share transfer form dated 30 June 1994 of 35 shares from the deceased to Paul Sathio. Paul Sathio said he spoke with his father about minority shareholders in his father’s company taking advantage of him and he did not want the same thing to happen in relation to the company. He said his father agreed to reduce his shareholding and executed the transfer form.

6 Mrs Ni Putu said that on one occasion her husband told her that he had signed a blank form Paul Sathio had given him so they could receive dividends from their share of the profits generated by the company and their house at Maroubra would be released from mortgage and the certificate of title returned to them. He said he had kept a copy of the form. Mrs Ni Putu discovered a blank standard transfer form with her husband’s signature on it after his death.

7 That document was not, however, the transfer form in question for the deceased’s signature appeared on the blank document further from the margin than did his signature on the share transfer form in question.

8 Paul Sathio said the details of the shares, the names of transferor and transferee and the address of the transferee were filled in on the share transfer form when his father signed it. He said the consideration was subsequently determined by the company’s accountant, Raymond Patmore and Paul Sathio filled in that amount and the date of purchase at a later stage. Mr Patmore did not recall determining the price, but he may have done so.

9 It was common ground that the amount stated to be the consideration was not paid. It was the defence case that the shares were transferred to Paul Sathio by way of gift.

10 Paul Sathio lodged the company’s 1995 annual return on 13 November 1995. It recorded his father as still holding 45 shares in the company. The pre-printed information in the 1996 annual return that was lodged on 30 November 1996 showed the deceased as holding 10 shares.

11 Mrs Ni Putu said her husband told her he regretted trusting Paul Sathio because he had cheated them and mistreated them. He told her he had tried to get the money they had invested in the company returned to them but all Paul Sathio did was throw money on the floor in front of him. She said her husband had, on many occasions, said his shares in the company would be transferred to her when he died and the family would be able to have the benefit of the dividends from the company. She said her husband said this to her in the weeks before he died. She said that until his dying day she believed he held a 45% interest in the company and he believed so as well. Her husband died on 1 February 2000.

12 Mrs Ni Putu swore an affidavit in the Probate Division on 12 September 2003 explaining her delay in seeking letters of administration of her husband’s estate. Amongst other things she said she had to rely on Tio Sathio to determine if her late husband had any shares in the company. She said she was not fully aware of the number of shares her husband held in the company and she requested Tio Sathio to determine if he had any shares in the company and was told he had.

13 Mrs Ni Putu said that neither she nor her late husband was conversant in or understood the English language and her husband told her that he had signed many documents given to him by Paul Sathio which he was told were needed because he was a director and shareholder of the company. Her husband said: “We must trust Paul, he is our son”.

14 Tio Sathio said that his father told him he regretted trusting Paul Sathio and giving him the starting capital for the company. He said he had received nothing for his investment. He hoped that Paul Sathio would mend his ways and return the investment and profits to the family after he died and he hoped that Tio Sathio would look after the company in his absence.

15 There was ongoing disputation within the family. In early 1998, Paul Sathio travelled to Indonesia for a meeting with the family to resolve disputes about money.

16 Paul Sathio said his siblings demanded that he repay to their parents the moneys advanced by his father and, notwithstanding that he had provided his parents with funds from time to time and his father had made substantial gifts to his siblings, he agreed to provide his parents with a residential unit in a development he had under construction plus $200,000 and he would continue to pay the $1,000 per month he said he was providing to his mother.

17 He said he agreed to this course on condition that the unit would revert to his children on his mother’s death and that the moneys paid by him would be used solely by his parents and not given to any of his siblings. Secondly, he said the arrangement was subject to the transfer of all the outstanding shares in the company to him. He said he produced standard transfer forms he had taken to Indonesia with him and they were signed in blank by his father and Tio Sathio.

18 Paul Sathio said that when he returned to Australia he filled in the details and dated the forms 30 June 1997 for stamp duty purposes. He said the transfers were so dated because financial accounts of the company had to be produced to the Office of State Revenue and it was convenient to produce annual accounts for that purpose. He said he filled in the consideration on the transfer from Tio Sathio, it having been given to him by Mr Patmore as the value of the shares in question. He said that Mr Patmore filled in the consideration on the transfer from his father. Mr Patmore confirmed that the amount of the consideration on the transfer form was in his handwriting. Once again, it was common ground that the amounts specified as the consideration were not paid.

19 Tio Sathio held a degree in computer science from La Trobe University and a master of business administration from the University of Technology, Sydney. When he obtained his first degree, he said his father told him he should take an interest in the company and a 5% shareholding was transferred to him.

20 Tio Sathio said he was suspicious of Paul Sathio at this time and decided to work in Jakarta because Paul Sathio was hostile towards him. He said his father was in the habit of signing blank forms and had provided him with blank withdrawal forms that enabled him to withdraw moneys from any of his father’s bank accounts.

21 At the meeting in Indonesia in early 1998, Tio Sathio said that he was asked by Paul Sathio to sign a blank share transfer form. He did so after Paul Sathio promised that if the form was signed he would give the profits from the company to their parents and return the certificate of title to their Maroubra home. He then signed the blank share transfer form and he witnessed his father execute a similar blank transfer form at the same time.

22 In cross examination, Tio Sathio said he did not know he was transferring shares when he signed the form. He presumed it was a dividend transfer form because the main agreement was to get money out of the company. He said he did not read the document below the heading: “Standard Transfer Form”. He said he signed the document because he trusted Paul Sathio. His signature as transferor appears towards the bottom of the form.

23 Tio Sathio was referred to his observation that he was suspicious of Paul Sathio. He said his trust in his brother was reduced to 40-50% by the time he obtained his first degree and his mistrust increased as the years went by. It was put him that by 1998 he was very suspicious of his brother. He said: “30 or 40 or 50% still” but an agreement was finalised at the meeting and he believed in him.

24 Tio Sathio said that by the time he swore his affidavits he was aware that the form he had signed related to a transfer of shares. When he said in his affidavits that at no time had he received any consideration for the transfer he meant any consideration for the transfer or the dividend from the company. He avoided answering the question what he meant by “any consideration”.

25 I formed an unfavourable view of Tio Sathio’s evidence. He constantly asked: “say again” to difficult questions put to him in cross examination. He held two degrees from Australian universities and I formed the view that he had a far greater command of the English language than he indicated by his answers.

26 I find it difficult to accept that Tio Sathio would not have read the form he signed, particularly in light of his suspicion of his brother. Even the title to the form which he accepted he had read referred to a transfer and said nothing of the payment of dividends. He must have seen more of the form than the heading when he placed his signature towards the bottom of it. When Tio Sathio accosted Paul Sathio at a later stage for his failure to honour the agreement he never sort to utilise the document he had signed, a copy of which was held by another brother, to force Paul Sathio to pay dividends out of the company.

27 In any event, Tio Sathio signed the form and is, prima facie, bound by it.

28 There were unsatisfactory features in the way in which the company dealt with the transfers. While the transfer forms from the deceased appear to have been stamped about the time they bear date, the transfer form from Tio Sathio was not stamped until October 2003. Paul Sathio said it was misplaced and it was only when it was found in 2003 that it was stamped. Notice of change of shareholding with respect to the first transfer from the deceased was not lodged until considerably after the event. The later transfer forms were back-dated to 30 June 1997.

29 Those factors do not, however, detract from the fact that the share transfer forms were signed by the deceased and Tio Sathio. Nor do they, in my view, affect the consequence of those executions.

30 On 17 September 1998, Paul Sathio signed an agreement with his mother that the residential unit would be rented out and a sum comprising the rental and other moneys promised of $50,000 per year would be paid for 10 years and the residential unit would be given to Paul Sathio’s children. Paul Sathio said he signed this agreement because the family was pushing him to honour the agreement made in Indonesia but he did not have the funds and asked to pay $50,000 per year.

31 On 18 September 1998 he signed a further agreement with Mrs Ni Putu to keep his promise to hand over the residential unit in the form of rental and to pay $50,000 per year for 10 years and to return the property documents of the Maroubra house by the end of 1999 at the latest. In the document, Mrs Ni Putu agreed that upon her death the residential unit would be given to Paul Sathio’s children, the money paid to her would be used solely for her interests, the telephone expenses of the Maroubra home would not be Paul Sathio’s liability but the cost of electricity, gas and water would be. Paul Sathio said the changes effected by this agreement were minor and he signed it.

32 It was submitted that these agreements were entirely separate from the agreement reached in Indonesia in early 1998. They were confined to Mrs Ni Putu and did not involve the deceased. I reject that submission. The genesis of the agreements with Mrs Ni Putu was clearly the agreement struck within the family earlier that year.

33 Paul Sathio said he paid three instalments but did not pay the 2001 instalment because his mother had given portion of the funds to his brothers. He said he did not return the certificate of title to the Maroubra home because he did not have the funds to pay out the mortgage. It was put to him that he had sold a property in September 1999 for $990,000. He said that might have been the case but he could not remember an event five years ago.

34 Mrs Ni Putu alleged that Paul Sathio had withdrawn moneys from the joint bank account of she and her husband under a power of attorney that she claimed was never executed by either of them. She accused Paul Sathio of mortgaging the Maroubra home for a further period without consent utilising the power of attorney.

35 Mrs Ni Putu sued Paul Sathio in other proceedings in this court commenced in 2001. In those proceedings, Paul Sathio said the power of attorney was given to him because his parents travelled backwards and forwards to Indonesia. He said the Maroubra home was offered as security for a loan sought by the company. That loan was refinanced from time to time. Mortgages were executed by him under the power of attorney. He said the loan agreement was executed by his parents and they also executed acknowledgements that they understood the nature and effect of the documents they had executed.

36 The discharge of the mortgage and the return of the certificate of title to the Maroubra home occurred immediately before a mediation of the other proceedings in this Court. Consequent upon that mediation, orders were made that Paul Sathio pay his mother $350,000 in two instalments. The question of costs was referred to the Registrar and the statement of claim was otherwise dismissed.

37 Mr Patmore gave evidence that he witnessed the signatures of Mrs Ni Putu and the deceased to the power of attorney and signed it as witness. Mrs Ni Putu argued that it could not have been executed by her and her husband because they were not in Australia on the date it bore. However, the evidence revealed that the date was inserted by a secretary at a later stage. Mr Patmore was not cross examined on his assertion that he witnessed the execution of the power of attorney by Mrs Ni Putu and her late husband.

38 In January 2003, Paul Sathio applied for the deregistration of the company. He said that following deregistration the company was reinstated and he applied again in August 2003 to have it deregistered. When cross examined on this topic the witness continued to say: “Could be”.

39 These matters do not reflect well on the character of Paul Sathio. Nonetheless, they do not cause me to prefer the evidence of Tio Sathio to his. The deceased and Tio Sathio signed share transfer forms in blank. The deceased was in the habit of handing out blank documents signed by him for use by Tio Sathio in withdrawing funds from his bank accounts. That evidence supports the contention of Paul Sathio that the consideration for his agreement to return the certificate of title to the Maroubra home, Provide his parents with a residential unit and pay them moneys was the transfer to him of the remaining shares in the company. Further, support for that contention means that there is no reason to reject Paul Sathio’s statement that his father executed the earlier transfer form for the 35 shares by way of gift.

40 It was submitted that I should reject the transfer forms as evidence of the transfer of the shares because the consideration was mis-stated, the dates were inaccurate and, in the case of the first transfer, notification was not given to the Australian Securities Commission until sometime before the 1996 return form was forwarded to the company.

41 While Mr Patmore did not recall specifying the consideration on each occasion, it is a reasonable inference that he did so by calculating the value of the shares from the financial accounts of the company and that amount was included as the consideration in order to coincide with the value of the shares disclosed in the financial accounts that accompanied the transfer forms to the Office of State Revenue for stamping purposes. Likewise, the dates were entered as the end of the financial years in question to conform with the financial accounts lodged with the returns.

42 While the practice of inserting a valuation figure rather than the appropriate consideration for the agreement and the mis-dating of the documents is reprehensible it does not lead me to reject the evidence of Paul Sathio that the deceased and Tio Sathio agreed to transfer their shares to him in consideration for his promise to provide his parents with a residential unit, pay them a specified sum and return the certificate of title to the Maroubra home.

43 The only evidence of the execution by the deceased of the first transfer form came from Paul Sathio. The document bore a signature that appears to be that of the deceased and, indeed, counsel for the plaintiff did not assert that it had not been signed by the deceased.

44 By accepting Paul Sathio’s evidence with respect to the latter transfers, I have no reason to doubt his evidence with respect to the former. I find that the deceased made a gift of 35 shares in the company to Paul Sathio and that he and Tio Sathio transferred the balance of their shareholding to Paul Sathio in consideration for his promise to provide his parents with a residential unit, pay them the specified sum and return the title deeds to the Maroubra home.

45 The Stamp Duties Act 1920, s 97(1) provided that a company should not register a transfer of any marketable security in its records unless a proper instrument of transfer had been delivered to the company and unless the instrument was duly stamped.

46 It was submitted that I should order the rectification of the register with respect to the last transfer and restore Tio Sathio to it because his transfer was not stamped until October 2003. I reject that submission. A failure to comply with the Stamp Duties Act 1920, s 97(1) renders a company liable to a fine under s 97(3). It does not have the consequence that a transfer registered in contravention of the provision should not be recognised. If a contravention of the provision was sufficient to require the removal of the transfer from the register, the subsequent payment of the duty would, presumably, entitle the transfer to be restored to the register. It should not be supposed that a register kept in accordance with the Corporations Act 2001 (Cth) should be subject to such volatility.

47 It was submitted that I should set aside the latter transfers on the basis of fraud. The submission was that since the documents pre-dated the alleged arrangement fraud had been established. I reject that submission. There is not the slightest suggestion of any element of fraud. Either the transactions took place as Paul Sathio alleged or they did not. Having accepted the evidence of Paul Sathio as to the arrangements there was no further element that might have led to the setting aside of the transactions on the basis of fraud. True it is that the transfer forms were back-dated to accord with the date of the last financial accounts of the company before the transactions. That action was reprehensible. In the circumstances of this case, however, it did not suggest that no transactions took place at all or, if they did, they were tainted by fraud.

48 It was submitted that the arrangements were unconscionable because Paul Sathio had taken advantage of his father’s ignorance of the English language. There was no evidence to that effect. The evidence went no further than that the deceased was not conversant in nor understood the English language. There was no evidence that that shortcoming played any part in the deceased’s execution of the two transfer forms.

49 It was submitted with respect to the latter transfers that any agreement was repudiated by Paul Sathio by his failure to pay the moneys and deliver the certificate of title to the Maroubra home. By that stage, however, the agreement to transfer the shares had been fully executed. It was no longer an executory promise.

50 The Corporations Law (Cth), s 1091(1) provided that a company should not register a transfer of shares unless a proper instrument of transfer had been delivered to the company. What constitutes a proper instrument of transfer is not defined beyond the provision in s 1091(1A) that the jurisdiction of incorporation of the company must be shown. In my view the section is directed to the nature of the instrument and not to any mis-statement within it. Again, the consequences which flow from a failure to comply with the provision do not, in my view, extend to an automatic entitlement to exclude the transaction from the register and, to that end, to seek an order of the Court for rectification of the register.

51 In my judgment Mrs Ni Putu and Tio Sathio have failed to establish any basis for correction of the share register of the company.

52 It was submitted that the Corporations Act 2001 (Cth), s 175 was procedural (Grant v John Grant & Sons Pty Ltd (1950) 82 CLR 1 at 51) and, in consequence, the proceedings alleging fraud and unconscionable conduct should have been brought by way of statement of claim rather than by way of originating process under that section. In response it was submitted that the procedural aspects of the forerunner of s 175 are now contained in s 1071F with the consequence that s 175 had ceased to be procedural.

53 By way of defence, it was alleged that Mrs Ni Putu and Tio Sathio had been guilty of undue delay in bringing the proceedings and should be denied relief and, further, that the court’s discretion should be exercised against rectification.

54 In view of my finding that Mrs Ni Putu and Tio Sathio have not made out a case for rectification, it is unnecessary and inappropriate for me to deal with these further issues.

55 In my judgment the amended originating process in each of the proceedings must be dismissed and Mrs Ni Putu and Tio Sathio should pay the defendants’ costs.

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Last Modified: 06/17/2004